Automobile Segment Faced Weak Demand in 2014: Report

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Automobile sales in India shot up in December 2014 leaving behind the two wheeler and three wheeler segments. All through the last year, the industry remained under pressure as the consumer sentiment hit a new low resulting in a slower turnaround than it was projected to be.

The long time weak demand in the automobile segment has led the industry lobby group to trim down its forecast on the passenger vehicle sales for the current fiscal year. Furthermore, manufacturers are waiting for the upcoming budget to be proposed by the government at the end of February. It is believed by the automobile makers that the government will come up with measures to support the sector whose performance is a significant indicator reflecting the health of the economy.

The sales of the automobile segment rose in December 2014 to some extent as the buyers came forward in an attempt to beat the anticipated price hike that is likely to happen in January 2015. Notably, the government reduced the excise tax by 4 percent to 6 percent back in February 2014, but it lapsed at the end of the year.

Since the debut of January, car manufacturers including market leaders Maruti Suzuki, Honda Motor and Hyundai Motor have raised the pricing of their offerings. As per industry experts, the demand is likely to be dull in the coming months as the economy is believed to be sluggish and due to the price hike by vendors as well. However, a drop in the interest rates and probable incentives in the budget are expected to help in supporting the industry in the second of 2015.

As per Abdul Majeed, Analyst and Partner at PricewaterhouseCoopers, the automotive industry’s future is dependent on the government’s development agenda. Following the excise duty sops and new year performance, there was a minor uptick in the sales of 2014, but it will depend on the interest rates and fuel prices that will be mandated the government.

Notably, the prices of vehicles were down for almost nine months of the last year due to the concessions in excise duty that in turn helped in creating a positive sentiment among consumers, thereby stimulating sales. Furthermore, analysts predict that there would be a drop in the sales of 2015 as compared to 2014 and this has made the manufacturers to announce production cuts that will in turn result in job losses in the industry.

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